Pensions, furloughs and telework: What does a recession hold for California state workers?

California’s state workforce has already changed dramatically in response to the coronavirus pandemic.

People who reported to state offices for decades are working from home. Department leaders are navigating technology, security and policy hurdles to keep the work going. State residents are accessing government services online that used to require in-person visits.

Many aspects of state work eventually will return to normal. Some changes could become permanent. Here are five questions we’ll track in the months to come.

Will there be furloughs?

Many state workers remember the furloughs instituted under former Republican Gov. Arnold Schwarzenegger during the Great Recession. For five years, state employees had to take about three weeks off per year without pay.

A worsening economic outlook once again threatens California’s budget. If the state’s $17.5 billion in reserves proves insufficient to cover vanishing revenue, lawmakers will have to find ways to reduce spending.

Gov. Gavin Newsom’s budget proposal for the year to come, which had projected $222 billion in spending, is being overhauled. The state’s total payroll including benefits is about $30 billion a year, according to the Legislative Analyst’s Office.

Several state union representatives said they don’t expect Newsom, a Democrat who has been a labor ally, to enact furloughs as readily as Schwarzenegger. Unions that are negotiating new labor contracts this year have been tempering expectations related to workers’ pay.

On Thursday, a state Senate budget subcommittee forecasted an extended recession.

Lawamkers might not have a clear picture of the state’s finances until late this summer. Newsom’s administration extended tax-filing deadlines to July 15, meaning the state won’t have a full accounting of revenue from income tax until late this summer.

The pandemic likely will affect the budgets of the coming fiscal year and future years, driving down projected revenue by tens of billions of dollars a year.

“We are embarking on difficult fiscal times,” state Sen. Holly Mitchell, D-Los Angeles, said during the budget hearing.

Will telecommuting and virtual field offices be permanent?

For decades, California leaders have publicly supported teleworking for state workers. Studies have shown working from home increases productivity and job satisfaction and saves money.

Yet the state’s government, facing old habits and cultural resistance, has never broadly adopted telework. That all changed in the last month as departments scrambled to ink new telework policies and provide secure equipment to workers.

Departments have had to change how they interact with the public. The Department of Motor Vehicles has launched a “virtual office” where drivers can transfer vehicle titles, renew their registration and temporarily extend drivers’ licenses. The department says more online services are coming.

The changes raise questions of whether DMV customers will be willing to resume trips to crowded field offices once the coronavirus begins to recede, and whether managers will still be able to make a convincing case for workers to come to the offices.

State government has been in the midst of a $4 billion construction boom. If the state has to cut spending, telework could be part of a solution.

Do I have to worry about CalPERS?

CalPERS’ fund balance has taken big swings since the coronavirus started impacting world markets.

The California Public Employees’ Retirement System hit a record high value in January, clearing $400 billion. By March 22, its value had dropped to $335 billion. On Thursday, its value stood at about $371 billion — about what it was at the end of the last fiscal year.

The market swings likely are also affecting the California State Teachers Retirement System, but the fund doesn’t update its value as often as CalPERS.

CalPERS was about 70 percent funded in July, at the end of the last fiscal year, meaning it had about 70 percent of the assets it would need to pay all its current and future liabilities. The fund’s value was about $370 billion, about what it is now.

During the Great Recession, the system dropped from 101 percent funded to 61 percent funded. CalPERS CEO Marcie Frost has said the system is better prepared for another recession following a number of changes made in recent years.

Coming out of the last recession, former Gov. Jerry Brown proposed a 12-point list of changes to the state’s pension system to try to make it more stable.

The Legislature adopted nine of the changes and rejected three. Among the rejected items was a proposal to create a blended pension in which part of public employees’ retirements would move to a 401(k)-style plan.

Moves to those type of plans are periodically discussed for public pensions around the country, but rarely adopted.

If the CalPERS fund takes a more permanent tumble, some lawmakers might try floating 401(k)-style plans. University of California employees already have that option.

Short of a change on that level, lawmakers could consider skipping, eliminating or tweaking annual cost-of-living adjustments to the pensions or consider other retirement benefit changes.

Will there be pay incentives for those who go to work?

The pandemic has impacted some California public employees much differently than others.

Many have been able to work from home. Others have been able to use various kinds of leave to get by without working while they avoid the virus.

But others, including health care workers and emergency responders, have had to risk their health every day doing critical work. The differences create issues of fairness for the state, local governments and the federal government.

Some local governments in Northern California are giving essential employees extra vacation days for working through the pandemic. Democrats in the U.S. Senate have proposed paying a broad range of “front-line” workers, including public employees, an extra $13 per hour.

Public employee unions in California have made similar proposals to the state and are awaiting responses.

Will the state workforce shrink, or grow?

The state of California had about 233,000 employees in December 2019 and about 31,000 job openings, according to payroll records. Newsom’s budget called for adding hundreds more new positions.

During the Great Recession, the state eliminated many open positions to save money, and departments didn’t replace some people who retired. California has boosted its hiring efforts in recent years, but struggled to fill openings when the private sector was humming.

Now, stable state jobs likely are looking more desirable for job-seekers. But depending on cost-saving measures, departments could delay hiring or leave jobs unfilled.

This story was originally published April 20, 2020 at 5:25 AM with the headline "Pensions, furloughs and telework: What does a recession hold for California state workers?."